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Seminar_20231110

On the Stochastic Inventory Problem Under Order Capacity Constraints

10/11/23 | 12:30pm | MHL 224

Dr. Roberto Rossi, Full Professor

University of Edinburgh Business School

Abstract: We consider the single-item single-stocking location stochastic inventory system under a fixed ordering cost component. A long-standing problem is that of determining the structure of the optimal control policy when this system is subject to order quantity capacity constraints; to date, only partial characterisations of the optimal policy have been discussed. An open question is whether a policy with a single continuous interval over which ordering is prescribed is optimal for this problem. Under the so-called “continuous order property” conjecture, we show that the optimal policy takes the modified multi-(s, S) form. Moreover, we provide a numerical counterexample in which the continuous order property is violated, and hence show that a modified multi-(s, S) policy is not optimal in general. However, in an extensive computational study, we show that instances violating the continuous order property do not surface, and that the plans generated by a modified multi-(s, S) policy can therefore be considered, from a practical standpoint, near-optimal. Finally, we show that a modified (s, S) policy also performs well in this empirical setting.

Bio: Professor Roberto Rossi holds a B.Eng. and an M.Eng. from the University of Bologna (Italy), and a PhD from the University College Cork (Ireland). He holds the Chair in Uncertainty Modelling and Head of Management Science and Business Economics Group at the University of Edinburgh (UK) and he is a Fellow of the UK Higher Education Academy. His research focuses on automated reasoning: he develops systems that aim to be robust and scalable in such a way as to enable computers to act intelligently in increasingly complex real world settings and in uncertain environments. He conducts cross-disciplinary methodological as well as applied research in decision making under uncertainty, artificial intelligence, operational research and supply chain management. He has over fifty intellectual contributions in flagship international journals and conference proceedings and has attracted research council as well as industry funding in excess of 1 million EUR.

Event Time and Venue: November 10, 2023, 12:30pm, MHL 224

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